Cyprus as a Location for Your Activities

1. CYPRUS A Centre for International Business MGI GREGORIOU & CO

2. CYPRUS WHY CONSIDER CYPRUS AS A LOCATION FOR YOUR ACTIVITIES • Cyprus is a member of the European Union since 2004 so there are a lot of advantages to companies and individuals using Cyprus. It is an Independent Republic member of the UN and the Council of Europe. • Cyprus has a prime location. It is located in the north-east part of the Mediterranean at the crossroads of Europe, Asia and Africa. • Cyprus has the lowest Corporation Tax in Europe. 10% Corporation Tax for resident companies and 0% for non-resident companies.

3. WHY CONSIDER CYPRUS AS A LOCATION FOR YOUR ACTIVITIES • Dividends, profits from the sale of shares, capital gains and other incomes are totally tax exempt. • Cyprus has signed favourable tax treaties with more than 45 countries. • Cyprus is an established reputable International Business Centre and the proof is the 200.000 IBCs that have been registered. They cover a wide range of commercial activities including Forex, Real Estate, HI-TECH, Shipping, International Trusts, International Financial Services (IFS), International Banking Units (IBU) and Insurance Companies.

4. WHY CONSIDER CYPRUS AS A LOCATION FOR YOUR ACTIVITIES Cyprus has: • English based legal system • Free enterprises economy • Excellent telecommunications • Frequent air and sea connections • Well developed banking system • High quality of professional services and labour force

5. CYPRUS A EUROPEAN UNION MEMBER STATE • EU Parent Subsidiary Directive • Transactions between a Cyprus company and other EU countries are zero- rated provided that both companies are VAT registered • By transferring some of the processing in Cyprus, products can be exported from Cyprus with European Union export documents • EU membership allows access to a bigger labour market • Workers from EU member countries can work in Cyprus without a work permit • The above means more diverse labour force and • Potentially lower labour costs

6. WHY CONSIDER CYPRUS AS A LOCATION FOR YOUR ACTIVITIES TO ENJOY THE SUNSHINE AND THE SANDY BEACHES

7. Exploration of Natural Gas • Joint natural gas exploration, with a processing facility built in Cyprus, is among recent proposals. Cypriot Foreign Minister flew to Israel in August to hammer out related agreements. • The Cyprus government has now commenced the process for the second round of permits for exploitation of the new blocks which will offer more prospects for co-operation between Cyprus and Israel

8. TAXATION OF IBCs • RESIDENT COMPANIES Resident Companies are the Companies whose management and control is exercised in Cyprus. The Corporation Tax for Resident Companies is 10%. • NON-RESIDENT COMPANIES Non-Resident Companies are the Companies whose management and control is exercised outside Cyprus. The Corporation Tax for the Non-Resident Companies is Nil. • MEANING OF MANAGEMENT & CONTROL In practice, following decided tax cases management and control is exercised where: • The majority of the Directors reside. • The Board meetings are held. • The general policy of the Company is formulated.

9. DOUBLE TAX TREATIES Cyprus signed tax treaties with the following Countries:

10. CYPRUSVsTax Havens

11. INTERNATIONAL TAX PLANNING VARIOUS SCENARIOS

12. EU INVESTORS OR THIRD COUNTRY INVESTORS Dividends to shareholders no withholding tax CYPRUS HOLDING COMPANY Dividends to Cyprus companies low withholding tax 100% shareholder SUBSIDIARY COMPANY – Russia COMPANY OR ANY COMPANY IN A TREATY COUNTRY HOLDING COMPANIES(Dividend Income) EXAMPLE • A Cyprus IBC holds shares say in a Company operating in Russia • Dividends received in Cyprus are totally tax exempt • Dividend income is paid to Cyprus with a low withholding tax of 5% • In particular the advantages apart from the above are the low withholding taxes from Countries which signed the Double Tax treaties Dividends to shareholders no withholding tax 100% shareholder

13. CYPRUS ULTIMATE HOLDING COMPANY CYPRUS INVESTMENT COMPANY 100% shareholder Russia INVESTMENT COMPANIES(Expecting exit from Project) EXAMPLE • A Cyprus company owns a second Cyprus company which owns real estate in Russia • The exit is achieved from the project via either selling the shares in the first Cyprus company or selling the shares of the Cyprus investment company • Any gain from the sale of the shares is completely tax free in Cyprus. • The above conditions hold irrespective of the time frame of the ownership of the shares 100% shareholder

14. FINANCE COMPANIES EXAMPLE • Cyprus Company borrows money • Cyprus Company lends money • Small margin taxable in Cyprus at 10% • No withholding taxes on payments out of Cyprus • Credit relief for withholding tax • Profits reduced in operating country Interest payable Interest receivable

15. TRADING IN SECURITIES EXAMPLE • Cyprus Company buys securities • Cyprus Company sells securities • Profit is exempt from tax • No withholding tax on payments out of Cyprus • Dividend income exempt from tax as it is derived from trading activities • Interest income tax offset by overseas tax Buy Securities Sell Securities

16. TRADING & RE-INVOICING COMPANIES (Triangle Trade) EXAMPLE • Cyprus company purchases goods • Cyprus company sells goods • Profit taxable in Cyprus at 10% or zero% • No withholding tax on distributed dividends from Cyprus 100% shareholder

17. ROYALTY COMPANIES EXAMPLE • Use of treaty network • Small margin taxable in Cyprus at 10% • No withholding taxes on payments from Cyprus to non-residents regarding Royalties or Dividends • Credit relief for withholding tax • Profits reduced in operating country Royalty payable Royalty receivable

18. EMPLOYMENT COMPANIES EXAMPLE • Cyprus company employs staff • Profits taxable in Cyprus at 10% • Charges at cost plus small margin of profits • Profits reduced in operating country • Employee costs reduced as employees pay no tax and no S.I. contributions Charges for labour

19. Principal company CYPRUS Agency COMPANY OPERATING COMPANY Agency Company EXAMPLE • Use of treaty network – Commonly used with Ukraine • Cyprus company enters into the transactions with the companies in the treaty companies • There is an agency agreement between the Cyprus company and the principal company • Small margin taxable in Cyprus at 10% • No withholding taxes on the transfer of the funds to the principal

20. International Investment Collective Scheme • International Fixed Capital Company and International Variable Capital Company falling under The Cyprus Companies Law. Cap. 113 • Regulated by the Central Bank making it easier to attract investors • Easier entry and exit of new investors • Enjoys the same tax benefits as a normal Cyprus company • Physical presence in Cyprus needed • Duration of the process varies between 3-6 months

21. UK NON RESIDENT COMPANY UK REGISTERED COMPANY • UK non-resident Company managed and controlled from Cyprus with activities outside UK will not pay any tax in the UK but 10% in Cyprus which is the lowest in Europe • Take advantage of UK reputation • Make use of the double tax treaties concluded by Cyprus MANAGED AND CONTROLLED FROM CYPRUS

22. INTERNATIONAL TRUSTS • 1992 International Trust Law • Conditions: • Settlor is non-resident • Beneficiaries are non-resident • Trust property are situated outside Cyprus • At least one resident trustee

23. INTERNATIONAL TRUSTS • Benefits include: • Complete exemption from tax • Complete confidentiality • Quick and easy to set up • Low administration costs • Advantageous for asset protection and for inheritance planning

24. RECENT TRENDS COMPANIES MOVING THEIR PHYSICAL PRESENSE TO CYPRUS Over the last few years many companies begin establishing their physical presence in Cyprus hiring local staff and staff from European Union or third countries. These companies mainly are dealing in: High technology sector E –commerce companies Trading companies Real estate companies CYPRUS

25. ADVANTAGES FROM MOVING THE OPERATIONS TO CYPRUS • Strengthens demonstration of management and control of the company exercised from Cyprus • Access to more diverse labor force • Potentially lower administration costs • Employees relocating to Cyprusfor the first time will be entitled to a tax free income of 28,050 euro for the next three years! • An employee with gross income of EUR 50,000 will have after tax profit of 44,678 euro, i.eeffective tax rate of just over 10% • Daily flights to Tel Aviv and other EU destinations

26. ABOUT USWHY CONSIDER MGI GREGORIOU & CO TO BE YOUR AUDITOR, TAX AND BUSINESS ADVISORS With MGI Gregoriou & Co: • You will always be valued clients • You will have a strong personal and professional relationship • You will anticipate new ideas and inspired solutions • You will realize that our integrity never compromises

27. MGI GREGORIOU & COIN CYPRUS Our History MGI Gregoriou & Co was founded in 1973. Over the years our Firm has experienced a substantial growth and today we are one of the leading accounting firms in Cyprus with more than one hundred partners and employees and with offices in all towns, offering the most comprehensive range of services to our clients. Our Recognition MGI Gregoriou & Co is also one of the first four accounting firms of Cyprus which has been authorised by the Institute of Chartered Accountants in England and Wales for the training of university graduates to be qualified as Chartered Accountants. Our International Associates MGI Gregoriou & Co is a member of MGI. MGI is a worldwide association of independent auditing, accounting and consulting firms. Established over fifty years ago, MGI is now represented in over 280 offices, on all continents, and in more than 82 countries throughout the world. The MGI international network provides the advantage of international links to all its members, but still allows them the freedom to operate independently in their city and cultural environment, providing services appropriate to their unique client base. Nicosia Head Office

28. Our Services • International Tax Planning • Company and Trust Formation and Administration in Cyprus, UK and offshore jurisdictions like BVI, Seychelles, Belize • Banking in Cyprus, UK, Austria • Audit, Assurance and IFRS Advisory services • Corporate Finance – Valuations due diligence • Escrow Services • Preparing Applications for licenses from CYSEC for regulated entities

29. CONTACT US NICOSIA (HEAD OFFICES)GREG TOWER7 Florina StreetP.O.Box 248541304 NicosiaCyprus   Telephone:  +357 22 451555  +357 22 451555 Facsimile: +357 22 451556 E-mail: n.gregoriou@gregoriou.comManaging Director:Andreas N. Gregoriou Director of IBC’s:Nicholas GregoriouDirector:Gregoris Petsas Director:Loria Gregoriou PAFOSGREG HOUSE15, Renos Str.P.O.Box 602548101 PaphosCyprus Telephone:  +357 26 933957  +357 26 933957 Facsimile: +357 26 936667Director: Markos Markou LIMASSOL11 Makedonias AvenuePatsalidou Court, 2nd FloorP.O.Box 534423302 LimassolCyprus Telephone:  +357 25 338850  +357 25 338850 Facsimile: +357 25 338851Director: Andreas N. Gregoriou Director:Nicholas Gregoriou Director: Loria Gregoriou LARNACAFrixos Center Business Court.33 Arch. Makarios III Ave.3rd Floor , Office 306P.O.Box 407126306 LarnacaCyprus Telephone:  +357 24 620650  +357 24 620650 Facsimile: +357 24 658858Director: Gregoris Petsas Director: Loria Gregoriou